A highlight of the 2015 legislative session was the promise that lawmakers are getting serious about examining costly tax incentives with a realistic eye.
Practically invisible to the public, tax incentives are government spending as sure as welfare benefits and pork-barrel projects are. The public’s treasury is reduced (by individuals and companies not being required to pay taxes or having taxes they do pay refunded) in exchange for certain priorities, such as the creation of jobs.
Sometimes those priorities are genuinely puzzling. Other times the priorities match the public’s desires, but the scale of the incentives are out of proportion to the good they do.
The most tangible progress on incentives this year was legislation to right-size tax deals for wind power. One bill phases out property tax exemptions for wind facilities and another makes them ineligible for a job-creation tax credit offered by the state. Another incentive, the zero-emissions tax credit, will remain on the books.
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After all, who doesn’t like the idea of wind energy? It’s renewable and doesn’t produce smokestack pollution. But the state can’t afford to give away the farm — or to be more precise, the schoolhouse — in pursuit of wind turbines on the prairie.
The Oklahoma Tax Commission has estimated that the five-year property tax exemptions will cost $38.2 million this year. The zero-emissions tax credit almost doubles that cost.
Congratulations to Sen. Mike Mazzei, R-Tulsa, and Rep. Earl Sears, R-Bartlesville, on good leadership on this issue.
Another set of measures, signed into law earlier this year by Gov. Mary Fallin, will require all business tax incentives to be evaluated objectively at least once every four years and require future incentives to include measurable goals. Tax incentives also will include “sunset provisions” in the future, which automatically repeal the incentives at the end of a given time period unless they are renewed by future legislators. That changes the political atmosphere on incentives in an important way, putting the onus on the incentive-receivers to prove they are producing economic growth and jobs in return for their tax deals.
House Speaker Jeff Hickman, R-Fairview, and Senate President Pro Tem Brian Bingman, R-Sapulpa, get credit for those reforms, although the legislation was dedicated to the memory of the late Rep. David Dank, R-Oklahoma City, a longtime advocate for sanity on tax incentives.
Only time will tell if the new tax incentive review and sunset provisions will effectively weed out tax giveaways that aren’t truly in the state’s interest, but we can say this much with certainty: The job is not done. Without vigilance by future Legislatures, slippery tax deals will continue to raid the public till quietly, denying needed funds to schools, roads, public safety and other real priorities.
